US crude ticks up 26 cents, settling at $66.36, as OPEC says oil market outlook is uncertain

Key Points
  • Oil prices were little changed, though volatility subsided to its lowest in weeks as caution builds ahead of a key OPEC meeting.
  • OPEC warned there's a high degree of uncertainty hanging over the global oil market this year.
  • Saudi Arabia reported that the country increased oil output to a little more than 10 million bpd in May.
OPEC logo at its headquarters in Vienna, Austria.
Heinz-Peter Bader | Reuters

Oil prices were mixed on Tuesday, with U.S. crude gaining and Brent crude slumping, as investors prepared for a key meeting of the OPEC producer group next week.

U.S. West Texas Intermediate crude futures ended Tuesday's session up 26 cents at $66.36. Brent crude futures were down 60 cents at $75.86 a barrel by 2:21 p.m. ET.

Crude future were in line with the broader financial markets, which were largely unruffled by a U.S.-North Korea summit aimed at the denuclearization of the Korean peninsula.

"I was looking for an up day (for WTI) — in just a few weeks it had fallen from around $73 (a barrel) to $65...and even for the window of seasonal decline, that's a big move to go uncorrected," said Walter Zimmerman, chief technical analyst at ICAP-TA.

He said short-covering ahead of next week's OPEC meeting also provided some support to prices.

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The Organization of the Petroleum Exporting Countries released its monthly report on Tuesday, saying a high degree of uncertainty was hanging over the global oil market this year.

OPEC and other producing countries including Russia have cut oil output by 1.8 million barrels per day (bpd) since January 2017 in an effort to boost the market. The group holds its next meeting on June 22-23, and is expected to decide on future supply policy.

With U.S. sanctions threatening to cut Iranian exports and the potential for more declines in Venezuelan production, OPEC kingpin Saudi Arabia and Russia have indicated they would be willing to raise output to make up for any supply shortfall.

Russian production reportedly climbed to 11.1 million bpd in early June.

Top exporter Saudi Arabia reported on Tuesday that it increased oil output to a little more than 10 million bpd in May, from 9.9 million bpd in April.

"This fits with the theory that the Saudis and Russians are subtly moving toward a change to the agreement at this month's meeting," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

There is now a 'buying opportunity' in oil, says strategist

Still, OPEC said the outlook for the second half of 2018 is highly uncertain, even though the group's figures show a global glut is gone.

On Monday, Iraq's oil minister said producers should not be influenced by pressure to pump more oil.

Nonetheless, many analysts expect OPEC to decide to hike production.

"Recently, crude oil futures have lost some momentum amid uncertainty as traders prepare for potentially more supply returning to the market," the group said.

"I feel that if they would like to be a responsible swing producer for the global oil market, based on their (demand) numbers, they should increase production by at least 1 million bpd from the current level," PVM Oil Associates strategist Tamas Varga said.